By Rédaction Africa Links 24 with Daily Nation
Published on 2024-01-23 05:53:43
The Finance Act of 2023 brought about sweeping tax changes that have been beneficial for businesses, especially in the pharmaceutical sector. The administration of President William Ruto aims to position Kenya as a regional drug-making hub, leading to several tax incentives and waivers that have sparked controversy among Kenyans. The Act aims to attract foreign direct investment (FDI) into the pharmaceutical sector, particularly for multinationals manufacturing vaccines.
One such multinational, Moderna Inc, announced plans to establish an mRNA manufacturing facility in Kenya. This molecule, messenger RNA (mRNA), was instrumental in developing the vaccine for Covid-19. Moderna’s facility in Kenya is expected to produce up to 500 million doses of vaccines annually under a Special Economic Zone (SEZ) status. President William Ruto expressed excitement, emphasizing the government’s commitment to supporting such investments.
Kenya’s pharmaceutical exports have been growing, with substantial percentages going to neighboring countries such as Tanzania, Uganda, Somalia, Rwanda, Ethiopia, and Zambia. The International Finance Corporation (IFC) identified Kenya as presenting a significant market opportunity for locally manufactured pharmaceutical products, but further market development is required.
The Finance Act exempts vaccine manufacturers from withholding tax on royalties and interest and reduces corporate tax for vaccine manufacturers. Local purchases of plant and machinery for pharmaceutical production are also exempt from value added tax (VAT).
Domestically, Questa Care recently opened a pharmaceutical manufacturing factory in Nairobi, focusing on producing Antiretroviral (ARVs) drugs for HIV/Aids and other general category products.
However, the pharmaceutical sector faces challenges, including technical skills shortages, high utility costs, unpredictable tax measures, foreign exchange fluctuations, and the presence of counterfeit drugs. Deputy President Rigathi Gachagua has called for an intensified crackdown on counterfeit pharmaceuticals, as data shows that there were 5,893 wage employees engaged in the manufacture of pharmaceuticals and medicinal products.
Despite the challenges, the tax changes and investment incentives have sparked optimism and growth in Kenya’s pharmaceutical sector, attracting both local and international investors looking to capitalize on the country’s potential as a regional pharmaceutical hub.
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